plant to provide the company’s present needs can be constructed for P2,800,000 with annual operating disbursements of P600,000. It is expected that at the end of 5 years the production requirements could be doubled, which will necessitate the addition of an extension costing P2,400,000. The disbursement after 5 years will likewise double. A plan to provide the entire expected capacity can be constructed for P4,000,000 and its operating disbursement will be P640,000 when operating on half capacity (for the first 5 years) and P900,000 on full capacity. The plants are predicted to have indeterminately long life. The required rate of return is 20%. What would you recommend? Use Present Worth Cost Method Show complete manual solution

plant to provide the company’s present needs can be constructed for P2,800,000 with annual operating disbursements of P600,000. It is expected that at the end of 5 years the production requirements could be doubled, which will necessitate the addition of an extension costing P2,400,000. The disbursement after 5 years will likewise double. A plan to provide the entire expected capacity can be constructed for P4,000,000 and its operating disbursement will be P640,000 when operating on half capacity (for the first 5 years) and P900,000 on full capacity. The plants are predicted to have indeterminately long life. The required rate of return is 20%. What would you recommend? Use Present Worth Cost Method Show complete manual solution